What is 'Denomination'

Denomination is a classification for the stated or face value of financial instruments, including currency notes and coins, as well as bonds and other fixed-income investments. The denomination can also be the base currency in a transaction or the currency in which a financial asset is quoted. This further classification helps clarify acceptable payment options in transactions.

BREAKING DOWN 'Denomination'

A denomination is a unit of value most commonly assigned to physical currency, including coins and notes, as well as other financial instruments that maintain a set value, such as government-issued bonds. This value is often referred to as face value, as it is clearly noted on the front, or face, of the financial instrument.

Currency notes dispensed by most ATMs in the United States are only available in certain denominations, such as $20 bills or $100 bills. In a trade transaction, an exporter based in Europe may invoice the buyer in U.S. dollars, making the transaction a U.S. dollar-denominated one. While most commodities were quoted in terms of the greenback, as of 2011, commodities such as crude oil could be quoted in other currency of denominations, such as the euro.

Par Values as Denominations

The denomination of a bond is equal to the bond's par value, which is the amount paid upon maturity. Bonds can be purchased in a variety of denominations, ranging from $50 to $10,000. When a bond is purchased, it is sold for an amount below the marked denomination, as the difference between the sales price and the value at maturity serves a function similar to the interest earned in other investment vehicles.

The par value of a stock can also represent its denomination, but may be an inaccurate assessment of the security's value within the marketplace. A par value represents a minimum value for the particular holding. To avoid certain legal liabilities, many stocks are listed with par values as low as 1 cent.

Denomination of Collectible Currency

Certain pieces of currency have a higher retail market value than the associated denomination. For example, certain U.S. quarters produced between 1932 and 1964 were composed of 90% silver. Though the face value maintains the coins' worth at 25 cents, the market value may be higher based on the current price of silver, referred to as the melt value, as well as the condition of each coin and the date and mint involved. The difference between the denomination and the melt value ultimately led to a change the materials used to produce a quarter.

RELATED TERMS
  1. Sovereign Bond

    A sovereign bond is a debt security issued by a national government ...
  2. Global Bond

    A global bond is a type of bond that can be traded in a domestic ...
  3. At Par

    At par is a term that refers to a bond, preferred stock or other ...
  4. Bond Valuation

    Bond valuation is a technique for determining the theoretical ...
  5. Stated Value

    A stated value is an amount assigned to a corporation's stock ...
  6. Bond Discount

    Bond discount is the amount by which the market price of a bond ...
Related Articles
  1. Investing

    Simple Math for Fixed-Coupon Corporate Bonds

    A guide to help to understand the simple math behind fixed-coupon corporate bonds.
  2. Investing

    BNDX: Vanguard Total International Bond ETF

    Learn about the Vanguard Total International Bond exchange-traded fund, which invests in investment-grade foreign, sovereign and corporate bonds.
  3. Investing

    Top 6 Uses For Bonds

    We break down the stodgy stereotype to see what these investments can do for you.
  4. Investing

    The Basics Of Bonds

    Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
  5. Insights

    Giant Gold Coin Stolen From German Museum

    The 221-pound coin would be worth close to $4.5 million at current gold prices.
  6. Investing

    4 Basic Things to Know About Bonds

    Learn the basic lingo of bonds to unveil familiar market dynamics and open to the door to becoming a competent bond investor.
  7. Investing

    Beginner's Guide To Trading Fixed Income

    Beginner's Guide To Trading Fixed Income
RELATED FAQS
  1. Par value vs market value

    Learn about the difference between the par value and market value of financial securities, including the role they play in ... Read Answer >>
  2. How a bond's face value differs from its price

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par ... Read Answer >>
  3. Why would a stock have no par value?

    Corporations sometimes issue shares with no par value because it helps them avoid a liability should the stock price take ... Read Answer >>
  4. Par Value Stock vs No Par Value Stock

    Understand the difference between par and no par value stock and how this differentiation affects corporate liabilities and ... Read Answer >>
  5. How can I calculate the carrying value of a bond?

    Learn what the carrying value of a bond means, how it can change, and the easiest way to calculate a bond's carrying value ... Read Answer >>
Hot Definitions
  1. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  2. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  3. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  4. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  5. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
  6. Price Elasticity of Demand

    Price elasticity of demand is a measure of the change in the quantity demanded or purchased of a product in relation to its ...
Trading Center